My superannuation, totalling $480,000, is invested with REI Super, and the fund provides a range of investment options. In 2020, just before COVID, I switched all my balances to 100 per cent cash. I realised it was a mistake and that was the only time that I made an adjustment to my investment options. Now I am in my early 60s and I want to move away from cash. Would you be able to suggest a time frame to consider the switch? Over dinner, my son-in-law said there’s “nowhere to hide” as bonds are doing badly in the current market and shares are shaky.
Generally, I’ve found that people who switch into cash and then don’t switch back into a more aggressive fund, do worse than those who simply ride through the turbulence.
It’s sometimes better to ride through financial turbulence without changing your superannuation investment mix.Credit:
However, your son-in-law has a point, given that interest rates haven’t ceased rising and the US and Europe are forecast to enter a recession in the first half of 2023. Since you’re in cash now, it may not be the best time to move back.
Why not keep an eye on the news, and when the headlines say “sharemarket down 30 per cent” – assuming they will – switch back into a balanced fund.
My wife has a variety of ASX-listed shares purchased between 1994 and 2008. The earliest buys were Coles Myer Ltd (now Coles Ltd and Wesfarmers) and BHP (meaning she’s been allocated holdings in South32 and Woodside). Some of the records are now complex, although I’ve kept them meticulously. There’s the danger of them being lost so, as a backup, copies are in our safe custody envelope which recently had to be moved because the bank shut up shop. I’d prefer them stored electronically for the eventual calculation of capital gains tax and would welcome any suggestions you may offer? I’ve ‘sounded out’ the ATO and our accountant at various times but still don’t know the best thing to do.
You can set up an electronic record yourself, the simplest approach being to design your own Excel spreadsheets, or alternatively use the free program Google Sheets, although you might need to search Google for tips on how to set up the latter.
Alternatively, your wife can sign up, for free, to an online broker such as CommSec which would then maintain your portfolio and give you statements after June 30th each year. However, you need to input your own cost base for CGT purposes.
Or you can buy a record-keeping program, of which a few are listed on the net.
I am 62, self-employed, and divorced with no children. I draw $60,000 plus from my business, which earns around $200,000, own my own home worth $600,000, plus an investment property worth $700,000 and have $500,000 in an SMSF that includes property. I also have $550,000 post-tax profit from my business sitting in a bank account. I have been trying to increase my SMSF and pay the maximum annual contribution. What would be the best way to manage the $550,000 business profit so that I don’t have to pay tax on it again? Options I’ve considered include buying a property outright that I then live in. I would then rent my current home and keep it as an investment. Alternatively, use my business funds to buy my current home at its original purchase price to avoid CGT and then depositing that personal income in my SMSF.
It sounds as though you run your business through a company and there is $550,000 in undistributed profit that could be paid out as dividends, which would be taxable.
If so, then yes, your company could buy your home, but it would have to take out a mortgage, which could be difficult given this is a non-arm’s length transaction and, being a company, it wouldn’t receive the 50 per cent CGT discount when sold. It’s a silly proposition.
Once you cease your business, your income will presumably drop. You could then draw $84,000 a year in franked dividends a year from the company. After grossing this up you would pay tax on $120,000, thus staying below the 37 per cent tax bracket, then reducing your tax by the 30 per cent or $36,000 franking credit. Your net tax would thus be less than 2 per cent plus Medicare.
Having too much income is a problem that most people wish they had!
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters answered. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.
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